In response to your letter of September 17, 1997, the Congressional
Budget Office has estimated the budgetary impacts of four scenarios for
strategic forces. Those scenarios would maintain U.S. strategic forces
at a level of 6,000 warheads, lower warhead levels to 3,500 by 2003, and
make further reductions to 2,500 warheads and 1,000 warheads. The enclosure
discusses the budgetary impact of the alternatives over the next 10 years
and in the long run.

CBO will address your request for estimates of the budgetary impact
and security issues associated with other approaches to arms control in
a forthcoming analysis. Those approaches would include placing all non-deployed
warheads and weapons-grade materials in secure storage facilities and reducing
the alert status of some or all of the nuclear forces.

If you wish further details on the estimates we would be pleased to
provide them. The CBO contact is Raymond Hall.

For most of the last fifty years, the Department of
Defense (DoD) has maintained a triad of forces to respond to the threat
of nuclear warfare. Beginning in the 1970s, the size and shape of those
strategic forces have been influenced by arms control agreements between
the United States and the former Soviet Union. The first such agreement
under the Strategic Arms Reductions Talks (START) calls for the United
States to deploy no more than 6,000 warheads according to counting rules
established in that treaty. START II calls for the United States to reduce
its forces to 3,500 warheads by January 1, 2003, as written into the treaty,
or December 31, 2007, as recently agreed upon by President Clinton and
President Yeltsin. START I has been signed and ratified by both nations,
but START II awaits ratification by the Russian Duma.

In response to a Congressional request, the Congressional Budget Office
(CBO) has estimated the budgetary impacts of four alternative levels of
strategic forces. The alternatives include remaining at START I levels,
reducing to START II levels of 3,500 warheads by 2003 instead of 2007,
and making further reductions to 2,500 warheads and 1,000 warheads.

U.S. forces are currently at START I levels, and the Administration's
plan calls for reducing forces to START II levels by the end of 2007. CBO
estimates that reducing forces to START II levels by the end of 2007 would
save an average of $700 million a year through 2008 and about $800 million
a year in the long run, compared to maintaining today's forces. (All estimates
are expressed in constant 1998 dollars.) Making the START II reductions
by 2003 would yield additional savings of $700 million through 2008.

Reducing strategic warheads to 2,500 could save about $1.5 billion dollars
a year in the long run compared with funding for today's force levels or
it might not yield any additional savings if few or no platforms are retired.
For a limit of 1,000 warheads, CBO estimates that savings could increase
to about $2 billion a year in the long run.

Cost of Current Nuclear Forces (6,000-Warhead Limit)

The national defense budget includes funding for nuclear offensive forces
operated by the military services, Department of Energy weapons programs
that build and maintain nuclear warheads, and strategic command, control,
and communications (C3), and surveillance systems. Nuclear offensive forces
consist primarily of about 200 bombers, 550 land-based intercontinental
ballistic missiles (ICBMs), and 18 Trident submarines. These forces are
all armed with multiple nuclear warheads under the START I limit of 6,000
warheads.

In the fiscal year 1998 budget, the costs for current nuclear forces
and supporting activities total about $20 billion. That includes about
$8 billion for strategic offensive forces, about $4 billion for DOE programs,
$6 billion for C3 and surveillance, and another $2 billion for treaty verification
and other related programs. The 1998 total, however, includes just $2 billion
for force modernization compared with the $4 billion CBO estimates would
be necessary to replace and modernize today's offensive forces in the long
run. For that reason, CBO would estimate the total costs of maintaining
and supporting current nuclear force levels at $22 billion.

Defense spending contains still other sums that might reasonably be
attributed to nuclear forces--including efforts to reduce the threat from
other nation's nuclear forces. The Department of Energy will spend about
$6 billion in 1998 to clean and restore the environment from decades of
nuclear weapons production. Including the costs of missile defenses and
strategic air defenses would add another $5 billion, bringing the total
to $33 billion a year.

Budgetary Impact of START II(3,500-Warhead
Limit)

The START II treaty was signed by President George Bush and President
Boris Yeltsin on January 3, 1993. It was ratified by the United States
Senate in January 1996, but it awaits ratification by the Russian Duma.
The treaty would allow Russia and the United States to have 3,500 strategic
nuclear warheads, including no more than 1,750 warheads to be deployed
on submarines. ICBMs could have only one warhead and must be no more powerful
("heavy") than the Russian SS-19 missile. The treaty also places limits
on bombers and the use of missile silos. On March 21, 1997, Presidents
Clinton and Yeltsin agreed to extend the deadline for START II implementation
from January 1, 2003, to December 31, 2007.

Implementation by the end of 2007. DoD's current plans call for
implementing START II according to the Clinton/Yeltsin agreement. The Navy
would retire four of its oldest Trident submarines by 2003, and the Air
Force would retire 50 Peacekeeper missiles by 2008. Relative to START I
this plan would save an annual average of about $700 million through 2008--largely
because of costs that the Navy would not have to bear. Under START I, the
Navy would probably need funding for additional D5 missiles, modifications
to four submarines that carry C4 missiles, and overhauls (including refueling
the nuclear core) of those four submarines. Acquiring the D5 missiles would
cost an average of about $400 million a year through 2008, assuming the
Navy would buy about 100 more missiles at about $40 million a missile--the
approximate price of the most recent purchase. CBO estimates, based on
data from the Navy, that costs to modify hardware and software would total
about $250 million a boat and average about $100 million a year through
2008. Also, costs to overhaul the submarines would amount to about $175
million a boat and average about $70 million a year over the 1999-2008
period.

In addition, DoD's plan would save the costs of operating the four submarines
and 50 Peacekeepers. Although those forces cost about $300 million a year
to operate, DoD's plan would save only $1.3 billion through 2008--or an
average of about $130 million a year--because the changes to Peacekeepers
would not occur until after 2003.

Over the very long term, the difference between a START I force and
a START II force would be about $800 million a year. In addition to about
$300 million a year in operating costs, DoD would have to spend $500 million
a year to replace aging systems. Those replacement costs would include
about $400 million a year for the sea-based leg of the triad and about
$100 million a year for Peacekeeper missiles.

Implementation by January 1, 2003. Early implementation of the
START II treaty would result in additional savings of about $700 million
due to earlier retirement of the Peacekeeper missiles. There would be no
additional savings from retiring Trident submarines because the Administration
plans to retire the submarines by 2003.

Savings From a 2,500-Warhead Limit

At the Helsinki Summit, Presidents Clinton and Yeltsin agreed to negotiate
a treaty--often referred to as START III--that would call for a limit of
2,000 to 2,500 strategic warheads. The United States could implement such
an agreement in many ways. Reducing the number of warheads carried by existing
platforms would yield little or no additional savings. On the other hand,
savings would be significant to the extent that submarines, land-based
missiles, and bombers were eliminated. For example, if 200 Minuteman missiles
and 10 bombers were taken from the force while Trident missiles were modified
to carry 4 instead of 5 warheads, the 2,500-warhead limit would save about
$1.5 billion a year compared to today's force levels or about $0.7 billion
when compared to funding under START II. Those savings would stem not only
from reduced costs for day-to-day operations but also from avoiding future
costs to replace the aging systems. A 2,500-warhead limit could be realized
in many other ways that would affect budgetary savings. For example, greater
reductions in the number of platforms, including eliminating one leg of
the triad entirely, would increase the savings.

Savings from a 1,000-Warhead Limit

An agreement to maintain no more than 1,000 warheads could save roughly
$2 billion in the long run compared to funding for today's forces under
START I. Savings would vary depending on how many Trident submarines, Minuteman
missiles, and B-52 bombers were retained. As with a 2,500-warhead limit,
reducing the number of warheads per sea-based missile and keeping 14 Trident
submarines could contribute to meeting the objective, but it would not
offer as much savings as reducing the number of submarines and arming each
missile with more warheads. Similarly, whether B-52 bombers are retired,
held in a reserve role, or devoted entirely to nonnuclear warfare would
affect the budgetary impact. For example, paring the force by 200 Minuteman
missiles and arming each missile in 14 Trident submarines with one warhead
would save about $1.3 billion in the long run. Alternatively, if 300 Minuteman
missiles, 20 bombers, and 8 Trident submarines were taken from the force,
savings would total about $2.5 billion in the long run compared with START
I forces.